New Tax Free Childcare Scheme

This new scheme, which starts in Autumn 2015, was originally announced in 2013 as being worth up to £1,200 per child. It has now been announced that the Government support will be even more generous with the limit being increased to £2,000 per child per year. The parents will be required to open a special childcare account. If for example they pay in £8,000, the Government will top this up to £10,000 (like pension contributions and Gift Aid) which can then be used to pay their childcare provider. It is not just parents who will be able to pay into the childcare account but grandparents and other family members will also be able to contribute to the childcare costs.  To qualify, both parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year.
Unlike the existing employer-provided childcare voucher scheme which is only available to employees and directors, this new scheme will also be available to the self-employed. Those in existing employer provided schemes have the option of staying in their employer scheme (up to £55 a week free of tax and NIC) or switching to the new scheme. To support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the £50 a week minimum income.

It was originally proposed that the new scheme would be phased in, initially only applying to children under 5 and gradually extended to those under 12. It is now proposed that children under 12 will be eligible from the outset.  If your circumstances change or you no longer want to pay into the account, you’ll be able to withdraw the money you have built up. If you do, the Government will withdraw its corresponding contribution.